The accounting income (loss) figures for Farah Corporation are as follows:
2009..................$ 160,000
2010.....................250,000
2011......................80,000
2012..................(160,000)
2013..................(380,000)
2014....................130,000
2015....................145,000
Accounting income (loss) and taxable income (loss) were the same for all years involved. Assume a 32% tax rate for 2009 and 2010, and a 28% tax rate for the remaining years.
Instructions
Prepare the journal entries for each of the years 2011 to 2015 to record income tax expense and the effects of the tax loss carry backs and carry forwards, assuming Farah Corporation uses the carry back provision first. All income and losses relate to normal operations and it is more likely than not that the company will generate substantial taxable income in the future.